NEW DELHI: The new Income Tax Bill 2025 may be approved by the Cabinet on Friday, February 7, according to reports. Union Finance Minister Nirmala Sitharaman announced this during the Union Budget 2025. The new bill will replace the old Income Tax Act of 1961, aiming to make the tax system simpler and easier to understand.

Nirmala  Sitharaman mentioned that the new Income Tax Bill would bring more clarity. She promised that the bill would be “clear and direct.” The Finance Minister highlighted that one of the key goals of the new law is to reduce tax-related disputes and litigation, offering certainty to taxpayers.

In the 2024 Budget speech, she had already shared plans to review the 1961 law, aiming to make it more concise and easier to read. At that time, she said the changes should be ready by January 2025. The government also started seeking public suggestions about what changes people wanted in the new law.

The new bill, which will be introduced in Parliament soon, is part of a broader effort to modernize the country’s legal framework, following the replacement of the Indian Penal Code (1860) with the Bharatiya Nyaya Sanhita in July 2024.

Major changes expected include a simpler, digital tax filing system and efforts to reduce legal disputes. There are also talks of merging the assessment year and the financial year into one tax year, making things more straightforward. The government promises that the new law will be based on feedback from taxpayers and will not change existing tax rates. Officials say the goal is to support growth without causing inflation.

What Will It Focus On?

The government has already said that the bill will not add new taxes. Instead, it will aim to simplify tax laws, clear up confusion, and make it easier for taxpayers to follow the rules.

The bill will also include changes to the current law, mainly to reduce legal disputes. One possible change is lowering penalties for some offences, making the tax system more fair and less harsh for taxpayers.